Can Machines Time Markets? The Virtue of Complexity in Return Prediction
Author
AQRCapital
Date
2024/05/06
Description
Common wisdom has suggested that small, simple models are best suited for market timing applications, given finance’s “small data” constraint and naturally low predictability. However, we show that complex models better identify true nonlinear relationships and therefore produce better market timing strategy performance. We validate this "virtue of complexity" result in three practical market timing applications. ...
Property
Site
aqr.com
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